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G.R. No. 118492 August 15, 2001 customarily resorted to since the 1960's and the procedure has proven to be
problem-free. PRCI and the petitioner Gregorio H. Reyes, acting through
GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners, Godofredo, agreed to this arrangement or approach in order to effect the
vs. urgent transfer of Australian dollars payable to the Secretariat of the 20th Asian
THE HON. COURT OF APPEALS and FAR EAST BANK AND TRUST Racing Conference.
COMPANY, respondents.
On July 28, 1988, the respondent bank approved the said application of PRCI
DE LEON, JR., J.: and issued Foreign Exchange Demand Draft (FXDD) No. 209968 in the sum
applied for, that is, One Thousand Six Hundred Ten Australian Dollars (AU$
Before us is a petition for review of the Decision1 dated July 22, 1994 and 1,610.00), payable to the order of the 20th Asian Racing Conference
Resolution2 dated December 29, 1994 of the Court of Appeals3 affirming with Secretariat of Sydney, Australia, and addressed to Westpac-Sydney as the
modification the Decision4 dated November 12, 1992 of the Regional Trial drawee bank. 1âwphi1.nêt

Court of Makati, Metro Manila, Branch 64, which dismissed the complaint for
damages of petitioners spouses Gregorio H. Reyes and Consuelo Puyat- On August 10, 1988, upon due presentment of the foreign exchange demand
Reyes against respondent Far East Bank and Trust Company. draft, denominated as FXDD No. 209968, the same was dishonored, with the
notice of dishonor stating the following: "xxx No account held with Westpac."
The undisputed facts of the case are as follows: Meanwhile, on August 16, 1988, Wespac-New York sent a cable to respondent
bank informing the latter that its dollar account in the sum of One Thousand
Six Hundred Ten Australian Dollars (AU$ 1,610.00) was debited. On August
In view of the 20th Asian Racing Conference then scheduled to be held in
19, 1988, in response to PRCI's complaint about the dishonor of the said
September, 1988 in Sydney, Australia, the Philippine Racing Club, Inc. (PRCI,
foreign exchange demand draft, respondent bank informed Westpac-Sydney
for brevity) sent four (4) delegates to the said conference. Petitioner Gregorio
of the issuance of the said demand draft FXDD No. 209968, drawn against the
H. Reyes, as vice-president for finance, racing manager, treasurer, and
Wespac-Sydney and informing the latter to be reimbursed from the respondent
director of PRCI, sent Godofredo Reyes, the club's chief cashier, to the
bank's dollar account in Westpac-New York. The respondent bank on the
respondent bank to apply for a foreign exchange demand draft in Australian
same day likewise informed Wespac-New York requesting the latter to honor
dollars.
the reimbursement claim of Wespac-Sydney. On September 14, 1988, upon its
second presentment for payment, FXDD No. 209968 was again dishonored by
Godofredo went to respondent bank's Buendia Branch in Makati City to apply Westpac-Sydney for the same reason, that is, that the respondent bank has no
for a demand draft in the amount One Thousand Six Hundred Ten Australian deposit dollar account with the drawee Wespac-Sydney.
Dollars (AU$1,610.00) payable to the order of the 20th Asian Racing
Conference Secretariat of Sydney, Australia. He was attended to by
On September 17, 1988 and September 18, 1988, respectively, petitioners
respondent bank's assistant cashier, Mr. Yasis, who at first denied the
spouses Gregorio H. Reyes and Consuelo Puyat-Reyes left for Australia to
application for the reason that respondent bank did not have an Australian
attend the said racing conference. When petitioner Gregorio H. Reyes arrived
dollar account in any bank in Sydney. Godofredo asked if there could be a way
in Sydney in the morning of September 18, 1988, he went directly to the lobby
for respondent bank to accommodate PRCI's urgent need to remit Australian
of Hotel Regent Sydney to register as a conference delegate. At the
dollars to Sydney. Yasis of respondent bank then informed Godofredo of a
registration desk, in the presence of other delegates from various member of
roundabout way of effecting the requested remittance to Sydney thus: the
the conference secretariat that he could not register because the foreign
respondent bank would draw a demand draft against Westpac Bank in
exchange demand draft for his registration fee had been dishonored for the
Sydney, Australia (Westpac-Sydney for brevity) and have the latter reimburse
second time. A discussion ensued in the presence and within the hearing of
itself from the U.S. dollar account of the respondent in Westpac Bank in New
many delegates who were also registering. Feeling terribly embarrassed and
York, U.S.A. (Westpac-New York for brevity). This arrangement has been
2|Page
humiliated, petitioner Gregorio H. Reyes asked the lady member of the
conference secretariat that he be shown the subject foreign exchange demand
draft that had been dishonored as well as the covering letter after which he
promised that he would pay the registration fees in cash. In the meantime he
demanded that he be given his name plate and conference kit. The lady
member of the conference secretariat relented and gave him his name plate
and conference kit. It was only two (2) days later, or on September 20, 1988,
that he was given the dishonored demand draft and a covering letter. It was
then that he actually paid in cash the registration fees as he had earlier
promised.
Meanwhile, on September 19, 1988, petitioner Consuelo Puyat-Reyes arrived
in Sydney. She too was embarassed and humiliated at the registration desk of
the conference secretariat when she was told in the presence and within the
hearing of other delegates that she could not be registered due to the dishonor
of the subject foreign exchange demand draft. She felt herself trembling and
unable to look at the people around her. Fortunately, she saw her husband,
coming toward her. He saved the situation for her by telling the secretariat
member that he had already arranged for the payment of the registration fee in
cash once he was shown the dishonored demand draft. Only then was
petitioner Puyat-Reyes given her name plate and conference kit.
At the time the incident took place, petitioner Consuelo Puyat-Reyes was a
member of the House of Representatives representing the lone Congressional
District of Makati, Metro Manila. She has been an officer of the Manila Banking
Corporation and was cited by Archbishop Jaime Cardinal Sin as the top lady
banker of the year in connection with her conferment of the Pro-Ecclesia et
Pontifice Award. She has also been awarded a plaque of appreciation from the
Philippine Tuberculosis Society for her extraordinary service as the Society's
campaign chairman for the ninth (9th) consecutive year.
On November 23, 1988, the petitioners filed in the Regional Trial Court of
Makati, Metro Manila, a complaint for damages, docketed as Civil Case No.
88-2468, against the respondent bank due to the dishonor of the said foreign
exchange demand draft issued by the respondent bank. The petitioners claim
that as a result of the dishonor of the said demand draft, they were exposed to
unnecessary shock, social humiliation, and deep mental anguish in a foreign
country, and in the presence of an international audience.
On November 12, 1992, the trial court rendered judgment in favor of the
defendant (respondent bank) and against the plaintiffs (herein petitioners), the
dispositive portion of which states:
WHEREFORE, judgment is hereby rendered in favor of the defendant,
dismissing plaintiff's complaint, and ordering plaintiffs to pay to
defendant, on its counterclaim, the amount of P50,000.00, as
reasonable attorney's fees. Costs against the plaintiff.
SO ORDERED.5
The petitioners appealed the decision of the trial court to the Court of Appeals.
On July 22, 1994, the appellate court affirmed the decision of the trial court but
in effect deleted the award of attorney's fees to the defendant (herein
respondent bank) and the pronouncement as to the costs. The decretal portion
of the decision of the appellate court states:
WHEREFORE, the judgment appealed from, insofar as it dismissed
plaintiff's complaint, is hereby AFFIRMED, but is hereby REVERSED
and SET ASIDE in all other respect. No special pronouncement as to
costs.
SO ORDERED.6
According to the appellate court, there is no basis to hold the respondent bank
liable for damages for the reason that it exerted every effort for the subject
foreign exchange demand draft to be honored. The appellate court found and
declared that:
xxx xxx xxx
Thus, the Bank had every reason to believe that the transaction finally
went through smoothly, considering that its New York account had
been debited and that there was no miscommunication between it and
Westpac-New York. SWIFT is a world wide association used by almost
all banks and is known to be the most reliable mode of communication
in the international banking business. Besides, the above procedure,
with the Bank as drawer and Westpac-Sydney as drawee, and with
Westpac-New York as the reimbursement Bank had been in place
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since 1960s and there was no reason for the Bank to suspect that this
particular demand draft would not be honored by Westpac-Sydney.
From the evidence, it appears that the root cause of the
miscommunications of the Bank's SWIFT message is the erroneous
decoding on the part of Westpac-Sydney of the Bank's SWIFT
message as an MT799 format. However, a closer look at the Bank's
Exhs. "6" and "7" would show that despite what appears to be an
asterick written over the figure before "99", the figure can still be
distinctly seen as a number "1" and not number "7", to the effect that
Westpac-Sydney was responsible for the dishonor and not the Bank.
Moreover, it is not said asterisk that caused the misleading on the part
of the Westpac-Sydney of the numbers "1" to "7", since Exhs. "6" and
"7" are just documentary copies of the cable message sent to Wespac-
Sydney. Hence, if there was mistake committed by Westpac-Sydney in
decoding the cable message which caused the Bank's message to be
sent to the wrong department, the mistake was Westpac's, not the
Bank's. The Bank had done what an ordinary prudent person is
required to do in the particular situation, although appellants expect the
Bank to have done more. The Bank having done everything necessary
or usual in the ordinary course of banking transaction, it cannot be held
liable for any embarrassment and corresponding damage that
appellants may have incurred.7
xxx xxx xxx
Hence, this petition, anchored on the following assignment of errors:
I Section 1 of Rule 45 of the Revised Rules of Court provides that "(T)he petition
THE HONORABLE COURT OF APPEALS ERRED IN FINDING
PRIVATE RESPONDENT NOT NEGLIGENT BY ERRONEOUSLY
APPLYING THE STANDARD OF DILIGENCE OF AN "ORDINARY
PRUDENT PERSON" WHEN IN TRUTH A HIGHER DEGREE OF
DILIGENCE IS IMPOSED BY LAW UPON THE BANKS.
II
THE HONORABLE COURT OF APPEALS ERRED IN ABSOLVING
PRIVATE RESPONDENT FROM LIABILITY BY OVERLOOKING THE
FACT THAT THE DISHONOR OF THE DEMAND DRAFT WAS A
BREACH OF PRIVATE RESPONDENT'S WARRANTY AS THE
DRAWER THEREOF.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING
THAT AS SHOWN OVERWHELMINGLY BY THE EVIDENCE, THE
DISHONOR OF THE DEMAND DRAFT AS DUE TO PRIVATE
RESPONDENT'S NEGLIGENCE AND NOT THE DRAWEE BANK.8
The petitioners contend that due to the fiduciary nature of the relationship
between the respondent bank and its clients, the respondent should have
exercised a higher degree of diligence than that expected of an ordinary
prudent person in the handling of its affairs as in the case at bar. The appellate
court, according to petitioners, erred in applying the standard of diligence of an
ordinary prudent person only. Petitioners also claim that the respondent bank
violate Section 61 of the Negotiable Instruments Law9 which provides the
warranty of a drawer that "xxx on due presentment, the instrument will be
accepted or paid, or both, according to its tenor xxx." Thus, the petitioners
argue that respondent bank should be held liable for damages for violation of
this warranty. The petitioners pray this Court to re-examine the facts to cite
certain instances of negligence.
It is our view and we hold that there is no reversible error in the decision of the
appellate court.
(for review) shall raise only questions of law which must be distinctly set forth."
Thus, we have ruled that factual findings of the Court of Appeals are
conclusive on the parties and not reviewable by this Court – and they carry
even more weight when the Court of Appeals affirms the factual findings of the
trial court.10
The courts a quo found that respondent bank did not misrepresent that it was
maintaining a deposit account with Westpac-Sydney. Respondent bank's
assistant cashier explained to Godofredo Reyes, representing PRCI and
petitioner Gregorio H. Reyes, how the transfer of Australian dollars would be
4|Page
effected through Westpac-New York where the respondent bank has a dollar
account to Westpac-Sydney where the subject foreign exchange demand draft
(FXDD No. 209968) could be encashed by the payee, the 20th Asian Racing
Conference Secretariat. PRCI and its Vice-President for finance, petitioner
Gregorio H. Reyes, through their said representative, agreed to that
arrangement or procedure. In other words, the petitioners are estopped from
denying the said arrangement or procedure. Similar arrangements have been
a long standing practice in banking to facilitate international commercial
transactions. In fact, the SWIFT cable message sent by respondent bank to
the drawee bank, Westpac-Sydney, stated that it may claim reimbursement
from its New York branch, Westpac-New York, where respondent bank has a
deposit dollar account. The facts as found by the courts a quo show that
respondent bank did not cause an erroneous transmittal of its SWIFT cable
message to Westpac-Sydney. It was the erroneous decoding of the cable
message on the part of Westpac-Sydney that caused the dishonor of the
subject foreign exchange demand draft. An employee of Westpac-Sydney in
Sydney, Australia mistakenly read the printed figures in the SWIFT cable
message of respondent bank as "MT799" instead of as "MT199". As a result,
Westpac-Sydney construed the said cable message as a format for a letter of
credit, and not for a demand draft. The appellate court correct found that "the
figure before '99' can still be distinctly seen as a number '1' and not number
'7'." Indeed, the line of a "7" is in a slanting position while the line of a "1" is in
a horizontal position. Thus, the number "1" in "MT199" cannot be construed as
"7".11
The evidence also shows that the respondent bank exercised that degree of
diligence expected of an ordinary prudent person under the circumstances
obtaining. Prior to the first dishonor of the subject foreign exchange demand
draft, the respondent bank advised Westpac-New York to honor the
reimbursement claim of Westpac-Sydney and to debit the dollar account12 of
respondent bank with the former. As soon as the demand draft was
dishonored, the respondent bank, thinking that the problem was with the
reimbursement and without any idea that it was due to miscommunication, re-
confirmed the authority of Westpac-New York to debit its dollar account for the
purpose of reimbursing Westpac-Sydney.13 Respondent bank also sent two (2)
more cable messages to Westpac-New York inquiring why the demand draft
was not honored.14
With these established facts, we now determine the degree of diligence that
banks are required to exert in their commercial dealings. In Philippine Bank of
Commerce v. Court of Appeals15 upholding a long standing doctrine, we ruled
that the degree of diligence required of banks, is more than that of a good
father of a family where the fiduciary nature of their relationship with their
depositors is concerned. In other words banks are duty bound to treat the
deposit accounts of their depositors with the highest degree of care. But the
said ruling applies only to cases where banks act under their fiduciary
capacity, that is, as depositary of the deposits of their depositors. But the same
higher degree of diligence is not expected to be exerted by banks in
commercial transactions that do not involve their fiduciary relationship with
their depositors.
Considering the foregoing, the respondent bank was not required to exert
more than the diligence of a good father of a family in regard to the sale and
issuance of the subject foreign exchange demand draft. The case at bar does
not involve the handling of petitioners' deposit, if any, with the respondent
bank. Instead, the relationship involved was that of a buyer and seller, that is,
between the respondent bank as the seller of the subject foreign exchange
demand draft, and PRCI as the buyer of the same, with the 20th Asian Racing
conference Secretariat in Sydney, Australia as the payee thereof. As earlier
mentioned, the said foreign exchange demand draft was intended for the
payment of the registration fees of the petitioners as delegates of the PRCI to
the 20th Asian Racing Conference in Sydney.
The evidence shows that the respondent bank did everything within its power
to prevent the dishonor of the subject foreign exchange demand draft. The
erroneous reading of its cable message to Westpac-Sydney by an employee of
the latter could not have been foreseen by the respondent bank. Being
unaware that its employee erroneously read the said cable message,
Westpac-Sydney merely stated that the respondent bank has no deposit
account with it to cover for the amount of One Thousand Six Hundred Ten
Australian Dollar (AU $1610.00) indicated in the foreign exchange demand
draft. Thus, the respondent bank had the impression that Westpac-New York
had not yet made available the amount for reimbursement to Westpac-Sydney
despite the fact that respondent bank has a sufficient deposit dollar account
with Westpac-New York. That was the reason why the respondent bank had to
re-confirm and repeatedly notify Westpac-New York to debit its (respondent
bank's) deposit dollar account with it and to transfer or credit the corresponding
amount to Westpac-Sydney to cover the amount of the said demand draft.
5|Page

In view of all the foregoing, and considering that the dishonor of the subject
foreign exchange demand draft is not attributable to any fault of the
respondent bank, whereas the petitioners appeared to be under estoppel as
earlier mentioned, it is no longer necessary to discuss the alleged application
of Section 61 of the Negotiable Instruments Law to the case at bar. In any
event, it was established that the respondent bank acted in good faith and that
it did not cause the embarrassment of the petitioners in Sydney, Australia.
Hence, the Court of Appeals did not commit any reversable error in its
challenged decision.

WHEREFORE, the petition is hereby DENIED, and the assailed decision of the
Court of Appeals is AFFIRMED. Costs against the petitioners.

SO ORDERED. 1âw phi 1.nêt

Bellosillo, Mendoza, Quisumbing, and Buena, JJ., concur.